In a recent Sunday edition of the Las Vegas Review-Journal, columnist Geoff Schumacher used a number of commonly cited arguments against the Tax and Spending Control initiative of State Senator Beers. Let’s review a few of them.
The op-ed asserts the “…initiative violates the spirit of American governance. We are a republic, which means we elect representatives to make governmental decisions on our behalf.” This argument is fallacious on its face. All democratic governments impose restrictions on their elected officials. That is the primary purpose of constitutions. In this case, the initiative simply limits the amount by which taxes and spending can increase. The average annual limit to increases in taxes and spending under the initiative based on historic population and inflation as well as projections would be in the neighborhood of 5 to 6 per cent—still a greater increase than most Nevadans will see in their incomes.
The column goes on to list a number of areas in which current spending is alleged to be inadequate. There is clearly need for government spending, yet, as every student hears in Economics 101, human wants and needs are unlimited, while resources are limited. There are two issues: How much to tax (and spend)? And, on what should tax revenues be spent? The two should not be confused.
Senator Beers’ initiative arose following a public outcry on the tax and spending increases approved in the 2003 Session of the Nevada legislature. The size of the increases, the role of the Nevada Supreme Court and the lack of gubernatorial leadership were all found wanting as was the wrangling in the legislature. The public did not like the result or the process. The tax and spending initiative is one response as is Assemblywoman Angle’s initiative for a California Proposition-13 type property tax restraint. Other responses to the public’s dissatisfaction may be better than the initiatives, but certainly mere promises by politicians are not. And other alternatives have yet to be put forward.
The op-ed cites “the tired Rush Limbaugh rhetoric that taxes are too high and government wastes our money,” but then sidesteps the issue. The fact is that in many cases government is effectively a monopoly supplier. Think of education, law enforcement, etc. Economists have long pointed out the deadweight economic loss caused by monopolies and the need for antitrust laws, fair trade laws and economic regulation. Government sponsored monopolies are not exempt from these monopoly inefficiencies. So, yes there is waste in government spending. Could a restraint on tax and spending reduce inefficiency? Perhaps it could.
Put waste in spending aside. There are still the dual problems of special interest groups using government power to feather their nests (the general public be damned), and the lack of accountability. It is a fact of life that as long as there are governments there will be special interest influences. It is clear that accountability is resisted by politicians and bureaucrats and is in fact difficult to achieve. A leading example is the resistance of the educational establishment to accountability standards in the face of poor educational results in Nevada. Always the plea is for more money—without accountability.
The TASC initiative is a partial solution to these dual problems. It would force a measure of accountability by limiting the tax resources available to politicians and bureaucrats. When resources are not unlimited, choices must be made and priorities set. Nevada taxpayers, knowing human wants and needs are unlimited but resources are limited, make the necessary tradeoffs everyday. Why should government have a different set of rules?
Another important issue raised was growth in Nevada. Tax increase limitations are opposed because population growth in Nevada purportedly requires disproportionately higher increases in spending. Yet who does growth benefit, what is the benefit and who should pay for it? Should existing residents pay increased taxes to benefit newcomers or business interests or to offset the costs imposed by newcomers? It is not growth that is the issue here, but rather the kind of questions that should be answered before taxes and spending are increased for some particular purpose.
History demonstrates that government bureaucracies grow, government spending increases and taxes go up. Putting some limit on this growth tied to underlying forces such as inflation and population-increase is not unreasonable. Nor is it unreasonable to foster greater accountability by forcing politicians to get voter approval for increases in taxes and spending above earlier increases.
Dennis Schiffel is a former senior associate at the National Science Foundation and a policy fellow of the Nevada Policy Research Institute.